A few weeks ago I wrote about the new golden girls, seniors sharing homes to save money. That’s not how everyone plans to spend their Golden Years, however. Boomers with gold to spare can opt for better living situations. The Wall Street Journal writes that aging Baby Boomers are likely to heat up the senior housing market.
The oldest Boomers will turn 80 next year, while the youngest turned 60 last year. There are more than 70 million Boomers. By 2030 the U.S. population 80 years of age and older will increase to nearly 19 million people, up 21% from today. Experts say 80 is about the age when seniors begin to need help with daily living activities and will begin looking for senior housing. While recently there was a glut of senior living facilities, this will turn into a shortage by 2030.
The sector is expected to move from its former glut to a shortage in the next five years. More than 560,000 new units are needed to meet all the demand by 2030, but only 191,000 will be added at current development rates, according to data service NIC MAP.
“We’ve never had a population pyramid that looks like this,” said Arick Morton, chief executive of NIC MAP. “The senior housing industry would need to develop twice as many units as it has ever developed in any single calendar year every year to keep up.”
I’m not sure why this is news. Boomers have busted institutions whenever they’ve reached milestones. Schools were busting at the seams and had to be built to accommodate young Baby Boomers. Colleges and Universities had to be expanded. Housing had to be built, which is now in short supply. Why would nursing homes, long term care centers and senior housing be any different? Even gastroenterology practices have become an opportunity for investment due to Baby Boomers, with investors claiming we’ve entered a golden age of rectums.
According to the Wall Street Journal, about 50% of Boomers cannot afford senior housing, while another 17% do not want to live that way in their old age. That leaves about one-third of Boomers who are the target market for senior living communities. That’s about 25 million Boomers.
Average monthly rents are above $4,100 for independent living units and $6,400 for assisted living units that include more care.
One problem is that covid reduced the rate of growth of senior communities, which has not caught up. Inflation in building costs and high interest rates make breaking ground on new construction too expensive to be profitable. Existing firms are on an acquisition binge, but that does nothing to increase supply. Of the new facilities that are being built virtually all are luxury properties for wealthy Boomers. Investors believe rich Boomers are the only ones able to pay rents high enough to make a profit and will be able to absorb rent increases more easily than middle-class residents.
Where there’s a booming market there will always be an opportunity. Perhaps eager investors will look for other alternatives to house people looking for assisted living. A community of tiny homes is going up a few miles away from my house. Rumors circulated early on that it was a retirement community. Those rumors have since been proven false, or perhaps investors changed their minds. The community of small, free standing bungalows and duplexes look like they would be ideal for active seniors who only want to maintain 400 square feet of housing versus 2,000. A few years ago, I stayed at a resort in Scottdale, Arizona that consisted of a small community of tiny duplexes. Each resembled an adobe casita, with a bedroom, a small living room with a kitchenette and a small courtyard. I can think of worse places to spend my Golden Years.
Read more at: The Senior-Housing Market Is About to Be Rekindled by Aging Boomers